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With reference to Non-Fungible Tokens (NFTs), consider the following statements: 1. They enable the digital representation of physical assets. 2. They are unique cryptographic tokens that exist on a blockchain. 3. They can be traded or exchanged at equivalency and therefore can be used as a medium of commercial transactions. Which of the statements given above are correct?

With reference to Non-Fungible Tokens (NFTs), consider the following statements: 1. They enable the digital representation of physical assets. 2. They are unique cryptographic tokens that exist on a blockchain. 3. They can be traded or exchanged at equivalency and therefore can be used as a medium of commercial transactions. Which of the statements given above are correct? Correct Answer 1 and 2 <span style="">only</span>

The correct answer is 1 and 2 only.

Key Points

Non-fungible tokens (NFTs)

  • It is cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other. Hence, Statement 2 is correct.
  • Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. Hence, Statement 3 is not correct.
  • This differs from fungible tokens like cryptocurrencies, which are identical to each other and, therefore, can serve as a medium for commercial transactions.
  • Typically contain references to digital files such as photos, videos, and audio. Because NFTs are uniquely identifiable, they differ from cryptocurrencies, which are fungible. 
  • The market value of an NFT is associated with the digital file it references.
  • NFTs are unique cryptographic tokens that exist on a blockchain and cannot be replicated.
  • They can be traded or exchanged at equivalency and therefore can be used as a medium of commercial transactions. 
  • NFTs can represent real-world items like artwork and real estate.
  • "Tokenizing" these real-world tangible assets makes buying, selling, and trading them more efficient while reducing the probability of fraud. Hence, Statement 1 is correct.
  • NFTs can also function to represent individuals' identities, property rights, and more.

Related Questions

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